Property/casualty (P/C) and life/annuity insurers are key players in capital markets, with $8.3 trillion in cash and invested assets in 2018, according to S&P Global Market Intelligence. P/C insurer cash and invested assets were $1.7 trillion in 2018. Life/annuity cash and invested assets totaled $4.1 trillion in 2018, and separate accounts assets and other investments totaled $2.5 trillion.
P/C and life insurer investments differ according to their payout needs. P/C insurers invest largely in high-quality liquid securities which can be sold quickly to pay claims resulting from a major hurricane, earthquake or man-made disaster such as a terrorist attack. In 2018 P/C insurers invested 23 percent of their assets in stocks, a highly liquid investment, and 60 percent in bonds (see chart below). Life insurers’ benefit payments are more predictable, because life insurance policies and annuity contracts are longer-term products. Life insurers therefore make longer-term investments. In 2018 life insurers invested 72 percent of their assets in bonds (compared with 60 percent for P/C insurers) and 2 percent in corporate stocks (compared with 23 percent for P/C insurers). (see chart, Investments, Life/Annuity Insurers, 2017-2018.) Life insurers invested 13 percent of their assets in mortgage loans on real estate, investments that may take seven years or longer to mature, compared with P/C insurers, who invested only 1 percent of their assets in this sector.
Insurance companies invest the premiums they collect in state and local municipal bonds, helping to fund the building of roads, schools and other public projects. They provide businesses with capital for research, expansions and other ventures through their investments in corporate equities and bonds.